Why do we subsidize TV and Movie Production? [Updated]

The legacy media businesses are just plain bad businesses: they apparently never make a profit and require constant subsidizing from local and State authorities; they require constant legislative support for their legacy (and obsolete) business models, and yet the public get very, very little from this investment. There’s no share of copyright, there’s no real payback in money spent locally.  It’s time to let these business stand, or fail, on standard business grounds.

Over time business models change and the worst thing we can do as a society is to artificially prevent businesses changing (and yes, failing). The legacy media providers refuse to accept this reality, and for some reason, local and State authorities fall over themselves to subsidize these failing businesses, and yet it never works out.

Time and time again, we see States falling over each other to offer subsidies, and quite sensibly producers chase them. If a deal is offered, why not take it. But those deals shouldn’t be offered. In State Subsidies To Hollywood: Almost Every Program Has Been A Dismal Failure, Costing Taxpayers Mike Masnick notes:

The studios, with the help of the MPAA, of course, continually argue that these programs create jobs, jobs, jobs. However, as the NY Times investigation pointed out, those “jobs” really don’t seem to be appearing. Instead, film crews ship in a crew from LA or NY and hire just a couple of locals for low-level jobs… which last a few months and that’s it. The impact on the local economy appears to be minimal. And, basically, the studios just keep asking for more money playing different locations off of one another.

Adding more data:

Adam Thierer points to a survey of studies looking at how successful those programs have been in various states… and found that nearly all of them have flopped.

The exceptions are New York and New Mexico, where the the studies were at the behest of the local industry and came up with positive results.Except more data reveals that even New Mexico  a separate, independent study found the exact opposite to be true, and found that the subsidy resulted in significant costs to the economy.

In another article Masnick discusses the subject of $1.5 Billion In Taxpayer Funds Go Directly To Movie Studios Each Year… And Very Few Jobs Created. $1.5 billion would make a decent number of movies by itself: in fact if we assume there are about 400 movies made at an average cost of $50 million each, we only get to $2 billion, most apparently coming from subsidies that don’t help the local economy. Advance estimates never seem to pan out: take Michigan for example:

Within two months, 24 movies had signed up to film in Michigan — up from two the entire year before. The productions estimated that they would spend $195 million filming there, and in return they would be refunded about $70 million in cash. 

And how did that work out? With the results we’ve come to expect from the lying liars in the legacy studios. No-one was prepared to put job creation actually in a contract (how convenient).

And the promised jobs? Keep looking. Sure, some crews from LA flew in, but for locals? Almost none.

The studio had created only 200 positions by the summer of 2011, according to correspondence between the company and local officials. And when temporary construction workers were excluded from the tally, Pontiac’s records show, the studio reported only two employees in 2010 and 12 the next year.

Earlier, in the article, they note that this particular project was pushed through with the promise of 3,600 jobs. You don’t do that by hiring two people one year and a dozen the next.

And yet, the recent Fiscal Cliff deal included more ways to subsidize “Hollywood” with a tax break.

If a movie takes a substantial portion of its budget from a subsidy shouldn’t those putting up the money own a portion of the resulting movie? Seems fair to me, but it’s not what happened in New Zealand where The Hobbit was subsidized to the tune of $120 million.

The worst part is that, for most of the wannabe Hollywoods, it’s bad economic policy on every level. The productions bring in mostly low-end, temporary jobs, while the high-end jobs remain in Hollywood or New York. Call it the Curse of Harry Potter.

It’s such a sweet deal, that the producers are fighting the New Zealand government to prevent the details being released.

Given that these movies never make “profits” due to the shady business practices in the Studios, and that they keep getting more and more copyright protection to extend obsolete business models, surely it’s time to stop the stupidity and make these business stand on their own. It’s time for Star-struck Governors to stop sucking up to “Hollywood” and demand they pay their fair share, or go somewhere else: call their bluff.

[Update] It seems like I’m not the only one that wants to get rid of subsidies that don’t convey equity to the State. In a (worthwhile read) on why the VFX industry is in the state that it is (bad financially), Digital Domain founder and former ILM boss Scott Ross suggest the cure:

If I had a magic wand, here’s what I would do:

1. Get rid of all tax subsidies & tax incentives – and if you can’t, offer them to the facilities, not the studios.

He continues with two other worthwhile suggestions.